The ATO has released its 'Compliance Program 2011/12' outlining key focus areas attracting its attention for the coming year.

They have a range of measures in place to detect and deal with those who evade their obligations, including working across government agencies and the use of overseas networks.

Their key focus areas this year include the cash economy, work related deductions and self-managed superannuation funds (SMSFs).

While the ATO "will continue to work with SMSFs to fix genuine problems", they state they may also take firm action, including making funds non-complying, if they commit serious breaches of the rules.

Editor: If a superannuation fund is made 'non-complying', it will effectively be taxed on the value of its assets at 46.5%, plus their income will also be taxed at 46.5% going forward.

This year, the ATO's compliance activity in relation to SMSFs will focus on:

unewly registered funds, to ensure they have not been established to provide illegal early release of super;

ufunds lodging their first annual return to ensure they are entitled to receive their 'notice of compliance';

urelated-party investments, to ensure they are not contravening the 5% in-house asset limit or the prohibition of lending to members;

uexempt current pension income and non-arm's length income; and

ure-reporting of contributions (particularly if the re-reporting results in the member no longer being liable for excess contributions tax).

New this year to family tax

The ATO has provided a summary of many of the tax changes that apply to families from 1 July 2011.

Education tax refund – Inclusion of school uniforms

The Government has changed the education tax refund to include school-approved uniforms (including hats, footwear and sports uniforms approved by a school as its uniform) purchased from 1 July 2011.

Dependent spouse tax offset phase-out

From 1 July 2011, eligibility for the dependent spouse tax offset will be confined to taxpayers with a dependent spouse born before 1 July 1971.

Taxpayers who maintain an invalid or permanently disabled spouse, support a carer or who are eligible for the zone, overseas forces or the overseas civilian tax offsets are exempt from the new age limit and will still effectively be able to claim the dependent spouse tax offset via an expanded invalid spouse, zone, overseas forces or overseas civilian offset.

Low income tax offset – Changes for minors

The Government will remove the ability of most minors (children under 18 years of age) to access the low income tax offset to reduce tax payable on their unearned income (for example, distributions from discretionary trusts, dividends, interest, rent, royalties and other income from property).

Medical expenses

Taxpayers can claim a tax offset of 20% of their net medical expenses over the set threshold, which is $2,060 for the 2011/12 income year (up from $2,000 for the 2010/11 income year).

Paid parental leave

Australia's Paid Parental Leave Scheme started on 1 January 2011. Eligible working parents will receive parental leave pay (currently $589.40 a week before tax) for a maximum period of 18 weeks.

Private Health Insurance

In the 2009-10 Budget, the government announced a proposal to income test the private health insurance rebate. To give effect to this announcement, the government introduced legislation on 7th July 2011 introducing three new ‘Private health incentives tiers’ with effect from 1 Jan 2012. If the legislation is passed, it is proposed that this measure will apply on and after 1 Jan 2012, and from that date; individuals and families may not be eligible for the full 30% rebate for their private health insurance premiums.

For the purpose of calculating your income threshold, it is based on the definition of income used to calculate Medicare levy surcharge for individuals and families.

In conjunction with income testing of the private health insurance rebate, it is also proposed that from 1 Jan 2012, the rate of Medicare levy surcharge for individuals and families without private patient hospital cover is increasing depending on your level of income.

Tier

Income

Private health Insurance rebate

Medicare levy surcharge

<65 years

65-69 years

>70 years

No Tier

Singles $0-80 k

Families $0-160k

30%

35%

40%

nil

1

Singles

>80 k -93k

Families >160k -186k

20%

25%

30%

1%

2

Singles >93k-124k

Families >186k-248k

10%

15%

20%

1.25%

3

Singles >124k

Families >248k

0%

0%

0%

1.5%

On Farm Budgeting Service

One of the new and updated services that we are offering primary producers is On farm Budgeting – which has more benefits than is first envisaged.

There is a saying “if you aim at nothing, you are sure to hit it”. This is very true of your business enterprise. The achieving of major milestones and profitability in your business are generally not an accident but as a result of clear objectives, good planning and actively improving the way you do things.

What is it that you want to achieve in your business? What are a couple of things you can do in the next year that are the first steps towards your objective?

Many small-business owners have remarked that their increase in profit margins did not occur until they had a cash-flow plan and a method with which to monitor expenses. This is also true of farming businesses even though the weather can result in a deviation on the original plan.

One of the benefits of the RMS Budget service is that the income and expense categories used are the same as your electronic cashbook. Most programs have a budget to actual comparison feature that enables you to monitor your progress. Once the budget figures are entered into your electronic cashbook, this is a powerful monitoring tool in comparing budget to actual results.

Should you wish to avail yourself of the RMS Budget facility, John Shepherd of our office, is well placed to provide this service to you.

John originates from Crookwell, having left the farm in 1992 after experiencing the wool boom and bust, among other highs and lows, realising that accounting and financial knowledge is important to ward off any surprises in farm management. John is a source of valuable knowledge and expertise in preparing and interpreting budgets and gross margins.

If you would like more information on this service please give John a call at our office.

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Just like you, we are always looking to grow. If you happen to know anyone who might benefit from our services, please know that we have the capacity to take on a small number of new clients, and we would be happy to meet with them for a free initial consultation.